UK's FTSE pares gains after ECB disappointment

Reuters Staff

3 Min Read

* FTSE 100 up 0.2 pct

* Lack of liquidity measures from Draghi hit stocks

* FTSE recovers quicker than peers after ECB

* Aviva, Aggreko surge after updates

By Alistair Smout

LONDON, March 6 (Reuters) - Britain’s top share index edged higher on Thursday, buoyed by updates from as Aviva and Aggreko, although a lack of new policy from the European Central Bank and uncertainty over Ukraine capped gains.

British equities tracked euro zone stocks lower, after ECB President Mario Draghi offered no new measures to boost lending in the region. Speculation that he would had boosted European stocks in early trade. British shares recovered faster, since they are less affected by ECB policy.

“We’ve been surprised by the sharp move lower in equity markets during Draghi’s speech, but it appears bulls have been disappointed by a failure to commit to further liquidity measures in the short term,” said Matt Basi, senior sales trader at CMC Markets, adding that he was not surprised by the speedy recovery of the index.

Britain’s FTSE 100 was up 15.80 points, or 0.2 percent, at 6,791.24 by 1425 GMT. It was up 0.3 percent before Draghi’s press conference.

A spate of bullish earnings reports also supported the index.

British insurer Aviva rose 8.9 percent to the top of the FTSE 100 after the company said operating profit rose 6 percent in 2013 and that it was proposing a final dividend of 9.4 pence per share.

Events in Ukraine also put pressure on the index. The Crimean parliament voted to leave Ukraine and join the Russian Federation, raising the stakes in the worst East-West confrontation since the Cold War.

The FTSE fell 1.5 percent on Monday after Crimea was effectively seized by Russian forces at the weekend. It more than made up the drop on Tuesday, as Russian President Vladimir Putin played down the prospect of war.

“We bounced too strongly on Tuesday ... and now this vote in favour of Russia sovereignty puts a spanner in the works and delays the resolution of the situation further,” said David Madden, an analyst at IG. “The prospect of a war is declining, but the situation is far from over.”

Technical analysts were unsurprised that the market could make only limited gains, but said that a steady performance was healthy in the medium term and should support a future rise.

“Prices have entered into a consolidation phase but remain supported by the key support threshold at 6640,” Nicolas Suiffet, technical analyst at Trading Central, said, identifying the 50 percent retracement level of the February rally as support.

“As long as 6640 holds as a support, a new up leg is likely towards the swing high area around 6865/6875 with 6950 as target in extension.”